Fed's Waller leans toward a December rate hike, puts a half-point move on the table

Federal Reserve Governor Christopher Waller said on November 10 that he is leaning toward supporting a quarter-point interest-rate increase at the Fed's December meeting, and that a half-point increase should be considered if October's core inflation came in at around 0.3% or higher, according to the text of his speech in London. Hours later, the US Bureau of Labor Statistics (BLS) reported that core consumer prices rose 0.3% in October.

What Waller said

Waller spoke at the Bank of England Watchers Conference in London, before the BLS released the October consumer price index (CPI) at 08:30 ET (13:30 UTC). He said the US economy is growing strongly and the labor market is stable, but that inflation is too high and further tightening "will be needed, sooner rather than later."

He set out two cases. Even if the monthly inflation rate improved in October, as he expected, he said he was "leaning toward supporting an increase in our policy rate of 25 basis points" at the December meeting. If core CPI, which excludes food and energy, matched the previous two monthly readings, at around 0.3% or more, he said a 50 basis point increase should be considered, adding that "Hiking only 25 basis points would put our credibility at risk, a risk I am not eager to take."

A basis point is one hundredth of a percentage point, so 50 basis points is half a percentage point.

What the CPI showed

The BLS reported that the all-items CPI rose 0.4% in October after 0.6% in September, and that core CPI rose 0.3% for a third month. The all-items figure was lower than September's, while the core figure was at the level Waller had named for a larger move. His speech, given before the release, did not include the October figures.

Why it matters

Waller has one vote among the 12 members of the Federal Open Market Committee (FOMC), which sets the federal funds rate target. In a footnote, he said the views in the speech were his own and not necessarily those of his colleagues.

The Fed kept the target range for the federal funds rate at 3.75% to 4% on October 28, with two officials dissenting in favor of an increase, according to its statement. Waller said he voted with the majority then because the committee's signals had already led markets to price in some tightening, and that what matters is that the expected increases are "eventually carried out."

He called September's inflation data "bad," citing the personal consumption expenditures (PCE) price index, the measure the Fed targets: up 0.5% in September and 3.7% from a year earlier, with core PCE up 3.1% from a year earlier. He also said Fed staff research gave him little reason to expect pressure from energy prices and the artificial-intelligence investment boom to fade soon.

What it could mean for traders

In our assessment, a higher expected path for rates tends to support the dollar and weigh on assets that depend on cheap funding and risk appetite, including crypto.

On November 10, Bitcoin (BTC) was at about $74,310 at 13:00 UTC, shortly before the CPI release, and at about $74,330 at 15:00 UTC, according to CoinGecko's hourly data. It then fell to about $72,840 at 17:00 UTC, its lowest level in that data since August 20. The drop extended a slide that followed a week of outflows from US spot Bitcoin exchange-traded funds (ETFs), about $1.28 billion net from November 2 to 6, according to the TFTC flow tracker. Price moves usually have more than one cause, and this one cannot be pinned on a single speech or data release.

What happens next

The Fed will announce its decision at the end of its December 8–9 meeting. The BLS publishes the November CPI on Thursday, December 10, at 08:30 ET (13:30 UTC), a day after the meeting ends.